Olive oil and sugar drive UK food prices up

UK shop prices fell at their fastest rate since 2021 in September, driven by discounts on non-food items, but fresh food inflation ticked up as olive oil and cocoa prices continue to surge.

The British Retail Consortium (BRC) reported a 0.6% drop in overall shop prices for the month, compared with a 0.3% decline in August.

This drop was primarily attributed to falling prices in non-food categories, including clothing and furniture, as retailers faced lower demand due to unseasonal weather and continued pressure on household budgets from rising energy and grocery bills.

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Fresh food inflation rose to 1.5% from 1% in August, as wet weather in the UK affected the production of salads and soft fruits, while storms in the Atlantic delayed imports of exotic fruits, pushing up costs.

A significant contributor to the rise in fresh food prices was the sharp increase in olive oil prices, which surged by 42% year on year, now averaging £9.12 per litre. According to the Office for National Statistics (ONS), global olive oil production has dropped to its lowest level in over a decade.

Countries such as Greece, Morocco, and Turkey have seen lower output due to the natural olive growth cycle, while Spain and Italy are facing extreme heat, drought and pathogen attacks linked to the climate crisis, disrupting their harvests.

Packaged food inflation also remained elevated at 3.3% in September, as the prices of key ingredients like cocoa and sugar continued to rise sharply. Overall, food inflation edged up to 2.3% in September from 2% in the previous month.

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Helen Dickinson, chief executive of the BRC, noted that September was a "good month for bargain hunters", with retailers offering significant discounts to attract customers.

"Shop price inflation is now at its lowest level in over three years," Dickinson said, adding that non-food categories saw the largest reductions in inflation, particularly furniture and clothing.

While the easing of shop prices offers relief to consumers, Dickinson said that ongoing geopolitical tensions, climate change, and regulatory costs could reverse the trend.

She urged the government to address the "disproportionate tax burden" faced by physical retailers by taking "decisive action" on business rates in the upcoming budget on 30 October.

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